Re-hypothecation means "someone else says they are the true owner of what you believed was yours, because the entity in control of the asset sold it to you, then sold it again to another buyer, and again."
from Wealth Cycles
This is part of the crazy world of derivatives and the financial services world.
The best way to describe Re-hypothecation is that you deposit dollars into a bank. The bank then uses those dollars and sell it to another buyer and they go ahead and sell it to another buyers. This is what led to the Mortgage Backed Security debacle in the United States. In the gold industry, Re-hypothecation is the norm. And that is why it will eventually collapse. Like the housing market collapse in the United States, the gold market will collapse because it is built on this house of cards foundation. All it takes is someone (probably a large institution) to call for their gold. Then other will follow. At some point, someone will not be able to get their gold and that is when the whole fraudulent system will collapse.
And don't think, it will be only relegated to the United States. Chinese trading exchanges have seen an increase in derivatives. The US and Europe it seems have exported derivatives and the eventual collapse.
There may be some good news. According to Wealth Cylces: Singapore has tripled it's gold imports and
"Beginning October 1st 2012, Singapore will exempt investment-grade gold, silver and platinum from a 7% goods and services tax (GST). This is massively good news not only for the local citizens but, perhaps more importantly, for global precious metals investors.
Taxing a particular type of money discourages its use. Lifting that tax opens the door for citizens and businesses alike to save in, trade and utilize an alternative, a huge boon for demand.
According to finance minister Tharman Shanmugaratnam, the intent is to develop a refining and trading industry within the nation. "
What this looks like is that SIngapore is setting up the foundation for a gold-backed exchange. One where paper is traded and proven to be able to be turned in for real physical precious metals. An exchange free from Re-hypoethecation and all the dangers that come with it. If Singapore or another country from likely the East successfully makes this gold backed exchange, investors world wide will flee their current risky Re-hypothecated gold paper exchange and go to one perceived as less risky. If this happens the demand for this new exchange will skyrocket compared to the supply of gold and the price of gold will go up with it.
This is a major major development, worthy of keeping track of closely.